Nike earnings show it's losing China. The stock falls 10%

Core Insights - Nike's stock dropped approximately 10% despite reporting quarterly earnings that exceeded Wall Street expectations, with revenues of $12.4 billion and earnings per share of $0.53, surpassing consensus estimates of $12.1 billion and $0.37 respectively [1][2] Financial Performance - The company experienced a year-over-year revenue increase of about 1%, but net income fell roughly 32% compared to the previous year [2] - Gross margins decreased by 300 basis points to around 40.6%, and inventories dropped by 3% primarily due to higher tariffs [2] Sales Performance - Nike Direct revenues, which include higher-margin direct-to-consumer channels, declined by about 8%, with digital sales experiencing a double-digit decline [3] - Sales in Greater China fell sharply by 17% to approximately $1.42 billion, continuing a multi-quarter slump that has disappointed investors [3] Future Outlook - The company forecasts a slight revenue decline in the next quarter and anticipates continued margin pressure due to tariff impacts and competitive dynamics [4] - Nike's leadership is attempting to frame current challenges as part of a broader turnaround strategy, with CEO Elliott Hill describing the situation as being "in the middle innings of our comeback" [5] Strategic Initiatives - Efforts are being made to rebalance the portfolio, strengthen wholesale partnerships, and focus on core sport categories as part of the recovery strategy [5] - There is a contrasting narrative among analysts and investors regarding whether the current situation represents stabilization or merely a pause in a slower rebound cycle [6]